Property Valuation
An appraiser performing a cost approach appraisal on a 15-year-old commercial building in Reno, Nevada estimates the building reproduction cost at $1,200,000 and the land value at $300,000. With an effective age of 15 years and economic life of 50 years, what is the estimated depreciation?
A$360,000✓ Correct
B$240,000
C$180,000
D$420,000
Explanation
Depreciation using the age-life method = (Effective Age ÷ Economic Life) × Reproduction Cost = (15 ÷ 50) × $1,200,000 = 0.30 × $1,200,000 = $360,000.
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